Earnings forecasts take big haircut

A major survey of securities analysts shows that the expectations for corporate earnings in Q1 and Q2 have turned grim. A poll by Reuters Surveys shows that experts think earnings for S&P 500 companies will only rise 0.4% year-over-year for the first quarter and 0.9% for the second quarter. Both numbers were down from those taken a week ago.

The numbers may be very optimistic. Earnings for S&P 500 dropped over 20% in the fourth quarter of last year according the same poll. The chance that banks, brokerages and insurance companies will have more write-offs due to problems in the mortgage markets and credit sector is very high. Retail earnings should fall because same-store sales are already coming in weak. Airline and auto industry figures should be pressured by high gas prices.

Even industries that often do well in a down markets could be hurt. Tech companies could face both businesses and consumers who feel that they can defer buying new PCs. Internet companies could see online sales pull back.

Consumer products firms should still do well. People will buy soap, toilet tissue and shaving supplies.

And then there are the oil companies. With crude over $100, they are almost a lock to have record numbers.

Earnings won't be flat in the first half of the year. They are going to be down, perhaps by a lot.

Douglas A. McIntyre is an editor at 247wallst.com.